Expert answer:Please answer each question with a min of 200 word
Answer & Explanation:Read 4.pdfCase
Summary
1. In a narrative format, discuss “Papa John’s” from a
strategic perspective. Information concerning recent changes in the firms is
readily available online and should be accessed. Strategic issues should be
discussed in “real time.”
Case Analysis
2. How would you describe Papa John’s competitive strategy
along the lines of the Porter and the Miles and Snow typologies? Support your
response.
Case
Analysis
3. Do Papa John’s marketing and production (service)
strategies support its competitive strategy effectively? Provide examples to
support your answer.
Application
4. Suppose you are the CEO of Papa Johns, and McDonald’s
just announced that it would begin to serve pizza in and deliver from all of
its restaurants in the United States. Would you make any changes to your
competitive strategy? What additional information would you like to have before
you make your decision? Explain.
read_4.pdf
Unformatted Attachment Preview
Business Unit
Strategies
Chapter Outline
W
7-1 Porter’s Generic Strategies
R 7-1a Low-Cost (Cost Leadership) Strategy
I 7-1b Focus–Low-Cost Strategy
G 7-1c Differentiation Strategy (No Focus)
H 7-1d Focus-Differentiation Strategy
T 7-1e Low-Cost–Differentiation Strategy
7-1f Focus–Low-Cost/Differentiation Strategy
, 7-1g Multiple Strategies
7-2 Miles and Snow’s Strategy Framework
S7-3 Business Size, Strategy, and Performance
H7-4 Assessing Strategies
E7-5 Global Concerns
R7-6 Summary
Key Terms
RReview Questions and Exercises
YPractice Quiz
Notes
2Reading 7-1
7
9
3
B
U
9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning
7
150
Chapter 7
A
Business Unit
An organizational entity
with its own unique mission, set of competitors,
and industry.
Generic Strategies
Broad competitive
Strategies that can be
adopted by business
units to guide their
organizations.
Strategic Group
A select group of direct
competitors who have
similar strategic profiles.
fter a firm’s top managers have settled on a corporate-level strategy,
their focus then shifts to how the firm’s business or businesses should
compete. Whereas the corporate strategy concerns the basic thrust of
the firm—where top managers would like to lead the firm—the business or competitive strategy addresses the competitive aspect—who the business
should serve, what needs should be satisfied, and how a business should develop
core competencies and be positioned to satisfy customers’ needs.
Another way of addressing the task of formulating a business strategy is to
consider whether a business should concentrate its efforts on exploiting current
opportunities, exploring new ones, or attempting to balance the two. Exploitation
generates returns in the short term; exploration can create forms of sustainable
competitive advantage for the long term. The business strategy developed for an
organization seeks, among other things, to resolve this challenge.1
A business unit is an organizational entity with its own mission, set of competitors, and industry. A single firm that operates within only one industry is also
considered a business unit. Strategic managers craft competitive strategies for
W and sustain competitive advantage, a state whereby its
each business unit to attain
successful strategies cannot
R be easily duplicated by competitors.2 In most industries, different competitive approaches can be successful, depending on the busiI
ness unit’s resources
G with a unique competitive strategy. In the interest
Each business competes
of simplicity, however, it is useful to categorize different strategies into a limH
ited number of generic strategies based on their similarities. Generic strategies
T
emphasize the commonalities
among different business strategies, not their
differences. Businesses
adopting
the same generic strategy comprise what is
,
commonly referred to as a strategic group.3 In the airline industry, for example, one strategic group may comprise carriers such as Southwest Airlines and
AirTran that offer low S
fares and no frills on a limited number of domestic routes,
thereby maintaining their low-cost structures (see Figure 7-1). A second strategic
H traditional carriers such as Continental, United, and
group may comprise many
American that serve both
E domestic and international routes and offer extra services such as meals and movies on extended flights.
R nitions and strategy assessments are not always clear,
Because industry defi
identifying strategic groups
R within an industry is often difficult. Even when the
industry definition is clear, an industry’s business units may be categorized into
Y
FIGURE
7-1
S tr a te gic Groups in the Air lin e I n dustr y
2
7
9
3
B
U
9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning
Business Unit Strategies
any number of strategic groups depending on the level of specificity desired. One
or two competitors may also seem to be functioning between groups and thus be
difficult to classify. For these reasons, the concept of strategic groups can be used
as a means of understanding and illustrating competition within an industry, but
the limitations of the approach should always be considered.
The challenging task of formulating and implementing a generic strategy
is based on both internal and external factors. Because generic strategies by
nature are overly simplistic, selecting generic approach is only the first step in
formulating a business strategy.4 It is also necessary to fine-tune the strategy and
accentuate the organization’s unique set of resource strengths.5 Two generic
strategy frameworks—one developed by Porter and another by Miles and
Snow—can serve as good starting points for developing business strategies.
7-1 Porter’s Generic Strategies
Michael Porter developed the most commonly
W cited generic strategy framework.6
According to Porter’s typology, a business unit must address two basic competiR
tive concerns. First, managers must determine whether the business unit should
focus its efforts on an identifiable subset Iof the industry in which it operates or
seek to serve the entire market as a whole.G
For example, specialty clothing stores
in shopping malls adopt the focus concept and concentrate their efforts on limited product lines primarily intended for aHsmall market niche. In contrast, most
chain grocery stores seek to serve the mass
T market—or at least most of it—by
selecting an array of products and services that appeal to the general public as a
whole. The smaller the business, the more, desirable a focus strategy tends to be,
although this is not always the case.
Second, managers must determine whether the business unit should compete
primarily by minimizing its costs relative S
to those of its competitors (i.e., a lowcost strategy) or by seeking to offer uniqueH
or unusual products and services (i.e.,
a differentiation strategy). Porter views these two alternatives as mutually excluEerode a low-cost structure by raising
sive because differentiation efforts tend to
production, promotional, and other expenses.
R In fact, Porter labeled business
units attempting to emphasize both cost leadership and differentiation simultaR
neously as “stuck in the middle.”7 This is not necessarily the case, however, and
Y alternative for some businesses.
the low-cost–differentiation strategy is a viable
Combining the two strategies is difficult, but businesses able to do so can perform exceptionally well.
2in a business unit address the first (i.e.,
Depending on the way strategic managers
focus or not) and second (low-cost, differentiation,
or low-cost–differentiation)
7
questions, six configurations are possible. A seventh approach—multiple strategies—
9 than one of the six configurations
involves the simultaneous deployment of more
(see Table 7-1). The low-cost and differentiation
3 strategies with and without focus
comprise those in Porter’s original framework.
B
UStrategy
7-1a Low-Cost (Cost Leadership)
Businesses that compete with a low-cost strategy produce basic, no-frills products
and services for a mass market of price-sensitive customers. Because they attempt
to satisfy most or all of the market, these businesses tend to be large and established. Low-cost businesses often succeed by building market share through low
prices, although some charge prices comparable to rivals and enjoy a greater
margin. Because customers generally are willing to pay only low to average prices
9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning
151
152
Chapter 7
TA B L E
7-1
Ge n e r ic S tr a te gie s Ba se d on Por te r ’s Ty pology
Emphasis on
Low Costs and
Differentiation
Emphasis
on Various
Factors
Depending
on Market
Differentiation
Strategy
Low-Cost–
Differentiation
Strategy
Multiple
Strategies
FocusDifferentiation
Strategy
Focus–Low-Cost/
Differentiation
Strategy
Emphasis
on Entire
Market
or Niche
Emphasis
on Low
Costs
Emphasis on
Differentiation
Entire
Market
Low-Cost
Strategy
Niche
Focus–LowCost Strategy
for “basic” products orW
services, it is essential that businesses using this strategy
keep their overall costs as low as possible. Efficiency is a key to such businesses, as
Rby mega-retailer Wal-Mart in recent years.
has been demonstrated
Low-cost businessesItend to emphasize a low initial investment and low operating costs. Such organizations tend to purchase from suppliers who offer the
lowest prices within a G
basic quality standard. Research and development efforts
are directed at improving
H operational efficiency, and attempts are made to
enhance logistical and distribution efficiencies. Such businesses often but not
T development of new and improved products or services
always deemphasize the
that might raise costs, and
, advertising and promotional expenditures will be minimized (see Strategy at Work 7-1).
S
S T R A T E G Y HA T
W O R K
7 – 1
The Low-Cost E
Strategy at Kola Real
R
Coca-Cola and PepsiCo enjoy substantial profit margins revenues on concentrates, the Ananos family makes its
on their soft drinks in Mexico’s $15 billion market, where
R own. Whereas Coke and Pepsi spend millions on prothe two have waged intense battles for market share motion and manage their own fleets of attractive trucks,
Y
during the past decade. Although Coke usually came the Ananos family hires third parties for deliveries—
out on top, the two collectively controlled sales and distribution in almost all of the country’s major markets.
2In
2003, Coke had more than 70 percent of Mexican sales,
7
and Pepsi had 21 percent. Consumers in Mexico drink
more Coke per capita than those in any other nation.9
In the early 2000s, however, both well-known colas
3
have been challenged by an unlikely upstart from Peru
known as Kola Real (pronounced “ray-’al”). Launched
B
in Mexico in 2001, Kola Real captured 4 percent of the
U
Mexican market in its first two years.
Bottled by the Ananos family from Peru, Kola Real
lacks all of the frills and endorsements associated
with Coke and Pepsi. The strategy is simple: Eliminate
all possible costs and offer large sizes at low prices.
Whereas Coke and Pepsi spend nearly 20 percent of
even individuals with dented pickup trucks—and relies
primarily on word-of-mouth advertising.
Central to Kola Real’s success is the fact that the
majority of Mexican cola drinkers are relatively poor
and consider price to be a major factor in their purchase decisions. In Brazil, so-called B-brands (i.e., lowcost generic or store brands) now account for almost
one-third of the country’s cola sales. Fearing this could
happen in Mexico, Coke and Pepsi have fought back
with price cuts of their own, although they will not be
able to challenge Kola Real’s low-cost position on a
large-scale basis.
Source: Adapted from D. Luhnow and C. Terhune, “A Low-Budget
Cola Shakes Up Markets South of the Border,” Wall Street Journal,
27 October 2003, A1, A18.
9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning
Business Unit Strategies
153
A cost leader may be more likely than other businesses to outsource a number
of its production activities if costs are reduced as a result, even if modest amounts
of control over quality are lost in the process. In addition, the most efficient
means of distribution is sought, even if it is not the fastest or easiest to manage. It
is worth noting that successful low-cost businesses do not emphasize cost minimization to the degree that quality and service decline excessively. In other words,
cost leadership taken to an extreme can result in the production of “cheap”
goods and services that nobody is willing to purchase.
Low-cost leaders depend on unique capabilities not available to others in
the industry such as access to scarce raw materials, large market share, or a
high degree of capitalization.8 Manufacturers that employ a low-cost strategy,
however, are vulnerable to intense price competition that drives down profit
margins and limits their ability to improve outputs, to augment their products
with superior services, or to spend more on advertising and promotion.9 The
prospect of being caught in price wars keeps many manufacturers from adopting the low-cost strategy, although it can affect other businesses as well. Other
W to control quality and distribution.
low-cost leaders have bought their suppliers
Price cutting in the airline industry led to
R the demise of several upstarts even
before the events of 9/11, and made it even more difficult to raise fares shortly
I
thereafter.10
Success with the low-cost strategy can G
be short lived, however. Low-cost airline AirTran, for example, boasted a 2003 profit of $101 million while Delta
H
squabbled with its pilots throughout the year in an effort to reduce costs. Delta
Ta hub, but has had difficulty cutting
dominates Atlanta where AirTran also has
costs. In 2004, however, Delta finally made
, headway and began cutting many of
its fares, some by as much as 50 percent. By 2005, AirTran, along with other lowcost airlines, began to feel the squeeze as major airlines such as Delta became
more price competitive.11
S
Imitation by competitors can also be a concern when the basis for low-cost
H duplicated. Lego discovered this
leadership is not proprietary and can be easily
fact when Canadian upstart Mega Blocks E
began to steal market share by making
colorful blocks that not only look like Legos, but also snap into them and sell for
R the Quatro line of oversized blocks
a lower price. Lego responded by launching
aimed at the preschool market and carrying
R lower prices than traditional Lego
playsets.12
Y
Low-cost businesses are also particularly vulnerable to technological obsolescence. Manufacturers that emphasize technological stability and do not respond
to new product and market opportunities may eventually find that their products
2
have become obsolete.
7
9
7-1b Focus–Low-Cost Strategy
3 overall costs while serving a narrow
The focus–low-cost strategy emphasizes low
segment of the market, producing no-frills
B products or services for price-sensitive customers in a market niche. Ideally, the small business unit that adopts the
U
focus–low-cost strategy competes only in distinct
market niches where it enjoys a
cost advantage relative to large, low-cost competitors.
The focus concept is clear in theory, but often confusing in practice. In general, a business rejects a focus approach when it attempts to serve most of the
market. In practice, however, virtually every business focuses its efforts, at least to
some extent. Because most is a subjective term, scholars sometimes disagree on
whether a particular business should be classified as focus or not.
Focus–Low-Cost
Strategy:
A generic business
unit strategy in which a
smaller business keeps
overall costs low while
producing no-frills
products or services
for a market niche with
elastic demand.
9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning
154
Chapter 7
Aldi is a clear example of a business that pursues a focus–low-cost strategy.
Aldi is an international retailer that offers a limited assortment of groceries and
related items at the lowest possible prices. Functional operations are tightly coordinated around a single strategic objective: low costs. Efforts are targeted to consumers with low to moderate incomes.
Aldi minimizes costs a number of ways. Most products are private label, allowing Aldi to negotiate rock-bottom prices from its suppliers. Stores are modest in
size, much smaller than that of a typical chain grocer. Aldi only stocks common
food and related products, maximizing inventory turnover. The retailer does
not accept credit cards, eliminating the 2 to 4 percent fee typically charged
by banks to process the transaction. Customers bag their own groceries and
must either bring their own bags or purchase them from Aldi for a nominal
charge. Aldi also takes an innovative approach to the use of its shopping carts.
Customers insert a quarter to unlock a cart from the interlocked row of carts
located outside the store entrance. The quarter is returned with the cart when
it is locked back into the group. As a result, no employee time is required
W a customer is willing to forego the quarter by not
to collect stray carts unless
returning the cart! R
Adding a focus orientation to cost leadership can enable a firm to avoid
I
direct competition with a mass-market cost leader. In this manner, grocer SaveA-Lot has found a wayGto compete successfully against Wal-Mart Supercenters.
Its prices are competitive with those at Wal-Mart, but Save-A-Lot pursues locaH
tions in urban areas that Wal-Mart rejected. Save-A-Lot also generates profits
T
by opening small, inexpensive
stores catering to U.S. households earning less
than $35,000 a year. Save-A-Lot
stocks mostly its own brand of high-turnover
,
goods to minimize costs and eschews cost-inducing pharmacies, bakeries, and
baggers.13
Like low-cost businesses,
S those adopting the focus–low-cost strategy are vulnerable to intense price competition that periodically occurs in markets with
no-frills outputs. For H
instance, several years ago, Laker Airways successfully
used the focus–low-cost
Estrategy by providing the first no-frills, low-priced transAtlantic passenger service. The major airlines responded by dropping prices,
R out of business. The large competitors, because of
eventually driving Laker
their greater financialR
resources, were able to weather the short-term financial
losses and survive the shakeout.14 Southwest Airlines, in contrast, adopted a
Y
similar strategy and has been able to perform well despite competitive pressure
from its large rivals.
To deter price competition, businesses employing the focus–low-cost strat2
egy must continuously search for new ways to trim costs. The Irish no-frills air
7
carrier Ryanair has surpassed
Southwest in this regard. Passengers are required
to pay for all food, drinks,
and
newspapers. Employees pay for their own train9
ing and uniforms. The airline even incorporates a strict no-refund policy, even
if the airline cancels a3 flight. Even with an average ticket price of about $50,
Ryanair faces constantB
pressure from its large rivals. In 2004, Ireland’s state carrier Aer Lingus added routes and lowered prices in an attempt to model itself
U
after Ryanair.15
Founded in 2003, Hungary’s low-cost airline Wizz Air specializes in transporting Hungarians, Poles, and other Eastern Europeans to Britain and Ireland
where many seek and find better paying jobs. CEO Jozsef Varadi sees buses—not
other airlines—as their primary competition. Sparked by recent expansion of
the European Union, Wizz Air makes economic sense for its customer base when
considering fares and travel time.16
9781111219802, Strategic Management: Theory and Practice, John Parnell – © Cengage Learning
Business Unit Strategies
155
Like low-cost businesses that do not adopt a focus approach, focus–low-cost
businesses are particularly vulnerable to technological obsolescence. Businesses
that value technological stability and do not respond to new product and market
opportunities may eventually find that their products have become obsolete and
are no longer desired by customers.
7-1c Differentiation Strategy (No Focus)
Businesses that utilize the differentiation strategy produce and market to the
entire industry products or services that can be readily distinguished from those
of their competitors. Because they attempt to satisfy most or all of the market,
these businesses tend to be large and established. Differentiated businesses often
attempt to create new product and market opportunities and have access to the
latest scientific breakthroughs because technology and flexibility …
Purchase answer to see full
attachment
How it works
- Paste your instructions in the instructions box. You can also attach an instructions file
- Select the writer category, deadline, education level and review the instructions
- Make a payment for the order to be assignment to a writer
- Download the paper after the writer uploads it
Will the writer plagiarize my essay?
You will get a plagiarism-free paper and you can get an originality report upon request.
Is this service safe?
All the personal information is confidential and we have 100% safe payment methods. We also guarantee good grades